Sections

Former EA exec calls consoles the company’s biggest threat

Wednesday, 27th March 2013 10:33 GMT By Dave Cook

Former EA, Disney and Activision exec Mitch Laskey has published a blog post suggesting that EA’s games label – the one that looks after core console and PC titles – is the company’s greatest risk moving forward.

The blog post reads, “It is interesting to think about EA’s assets and the current state of the digital game economy in light of the challenges a new leader at EA might face”, reffering to John Riccitiello’s departure last week.

He added, “In my experience, the incumbent packaged goods companies clearly see mobile, digital distribution and free-to-play models as inevitable. They know what’s coming and have known for some time. But within the senior management ranks of these companies there is still a lingering perception that digital doesn’t, in their words, “move the needle” sufficiently.”

Such a view is potentially damaging, warns Laskey, “There are games on the mobile and free-to-play PC platforms that are indeed capable of moving the needle. And for real next-generation publishers with customer acquisition leverage, hit games can generate almost unimaginable profit margins, at least by packaged goods standards”.

Laskey stressed that EA has been aggressive in trying to capitalise on the digital market, but that the company’s core games label is in real danger. “As counter-intuitive as it sounds, console is the wild card for the future of EA,” he continued, “the platform with the most risk.

“As everyone knows, the console business has been declining at double-digit percentage rates year-over-year for the last few years. At the same time, the option value ascribed to a possible re-invigoration of the console market from the launch of new hardware this Christmas has produced what some are calling a “dead cat bounce” for EA and Activision, who have the greatest exposure to the new consoles.

“In order to be a player on the new consoles, EA will need to greenlight a dozen titles, and they will be very, very expensive – given EA’s penchant for big spending, the need to support multiple hardware platforms simultaneously at launch, and online features, this could be close to a $1 billion R&D expense. And given the customary annual refresh in the sports genres, it’s necessary to keep spending year after year.”

Costs are going up in the core sector and returns are lowering. You don’t need to be a genius to see that, but is EA ready to try and reverse the flow? Let us know below.

Thanks GI.Biz.

Breaking news

7 Comments

Sign in to post a comment.

  1. DuckNation

    I want to slap him HARD!!!!

    #1 1 year ago
  2. OmegaSlayer

    PS3+360+Wii combined sold way more than PS2+XBOX+Gamecube combined.
    And games are selling loads more overall.
    So…bah.

    #2 1 year ago
  3. Myth

    He calls it a risk, not a threat. It’s a subtle distinction but it has a lot of meaning here.

    EA can’t live without the consoles, they’re their biggest driver of revenue by far. But there’s no way around that they are fairly expensive to build games for – requiring large teams and therefore large investments.

    In a new hardware cycle there’s even bigger investments and bigger risks, as the first few games you build will carry more “get-to-know-the-hardware” time than any game that follows.

    If you then add that you are building this game for a console with the lowest amount of potential buyers it will ever have (at launch, the console is not sold to anyone, and that means no potential buyers of your game), and no guarantee that the console will ever actually sell any copies, of course it’s a huge risk to run.

    But it’s the name of the game for EA, and with a multi-platform strategy that risk is stretched over many platforms and there are multiple angles for making back the investments.

    There’s a lot of connotation to the word risk when you’re talking in investment-language, and you can’t substitute threat and risk here.

    #3 1 year ago
  4. ps3fanboy

    their biggest risk is releasing unfinished crap games, that people don’t want to buy. or people don’t use their micro-transaction and their hellish origin client, they try to force down peoples throat.

    #4 1 year ago
  5. OmegaSlayer

    @4 you have a point
    I seriously wonder why such crap reach the market and ask myself: “didn’t the devs realize that this is utter crap?”

    #5 1 year ago
  6. roadkill

    ? Is console gaming dying? :)

    #6 1 year ago
  7. PC_PlayBoy

    As everyone knows, the console business has been declining at double-digit percentage rates year-over-year for the last few years.

    The console business will dip even more next gen. Consoles are dead and MS/Sony/Nintendo fucking know it.

    The future of gaming is: PC/MAC/Linux/iOS and Android.

    #7 1 year ago